Rishi Sunak has ordered a review of “drip pricing” under which companies hide the true cost of products and services by charging extra fees to consumers.
The UK prime minister said during his trip to Washington this week that the government would investigate how widespread the practice was and — if necessary — draw up measures to tackle the problem during a wider cost of living crisis.
Drip pricing refers to the addition of extra booking, joining or other charges by companies to the cost of products and services, ranging from concert tickets to gym memberships and air fares.
Some airlines offer customers a headline rate for a ticket before the total cost mounts up through an accumulation of baggage fees, priority boarding, in-flight meals or reserving specific seats.
The practice is not illegal but has raised concerns among consumer rights groups who say it is an underhanded way of squeezing extra cash out of consumers.
Sunak said he had initiated an inquiry by the business department into the issue.
“The Department of Business and Trade are looking into this issue of drip pricing to just get a sense of how widespread and how damaging it might be,” he said.
“I think we’re all probably anecdotally and individually aware of this practice of — you know, you just get more and more things added on to the cost of something as you move through a process and there’s just not the kind of price transparency that you’d expect.”
Sunak said the government would take further steps if required as part of the government’s broader attempt to tackle rising living costs.
“This is a practice that we want to make sure that we’re across, looking at, to see how harmful it is and if we need to take further action,” he added.
Depending on the outcome of the business department review, ministers could give the Competition and Markets Authority — the body which regulates competition in the UK — new powers to tackle drip pricing, according to officials.
The CMA in January launched a review into unit pricing in the grocery sector in a bid to combat cost pressures.
The officials said Sunak’s initiative would complement the government’s wider review of consumer rights and protections being carried out post-Brexit.
Sunak’s move follows an announcement by US president Joe Biden last year that he intended to cap what he called “junk fees”, such as hotels charging “resort fees” for WiFi or colleges adding extra costs on to students through sponsored financial products.
Rocio Concha, director of policy and advocacy, at consumer group Which?, said: “Drip pricing happens in a variety of sectors, from train bookings to food delivery apps and concert tickets. Fees can be added late into the buying process, making it more likely that consumers will accept them.
“It is positive that the government is reviewing these misleading practices but it must go further by explicitly banning drip pricing in its digital markets, competition and consumers bill to put a stop to this behaviour.”